‘Get ready for rise in rates’ says Bank chief

THE boss of the Bank of England has dropped his biggest hint yet on the timing of an interest rate rise.

With interest rates at 0.5% for six years, the Bank of England’s governor Mark Carney said in a speech at Lincoln Cathedral on Thursday that rates could rise “at the turn of this year”.

Amid a backdrop of a strengthening economy, he said that he expected rates to rise over the next three years, reaching “about half as high as historical averages”, or about 2%.

But he added further shocks to the economy could change the timing and the size of any rate rise.

The Monetary Policy Committee – which sets rates –  will “have to feel its way as it goes,” Mr Carney said in a speech at Lincoln Cathedral.

He added: “Short term interest rates have averaged around 4.5% since around the Bank’s inception three centuries ago.

“It would not seem unreasonable to me to expect that once normalisation begins, interest rate increases would proceed slowly and rise to a level in the medium term that is perhaps about half as high as historic averages.

“In my view, the decision as to when to start such a process of adjustment will likely come into sharper relief around the turn of this year,” he said.

The UK inflation rate is currently at zero but as the effect of lower oil prices feeds through, it is expected to start edging higher.